Apple is about to take a huge risk with its new iPhone strategy

Sales of the iPhone, iPad, and Mac are all dropping, which is
having an effect on Apple's bottom line.

Apple needs to release new products this fall to turn things
around, especially a new iPhone, given that iPhone 6S sales have
been disappointing.

Wall Street analysts have come to a consensus about what this
fall's iPhone — let's call it the iPhone 7 — will look like and
include.

And it's starting to become clear that Apple is taking a huge
risk.

The iPhone 7 will have a few upgrades, according to a Deutsche
Bank research note, but ultimately will look a lot like the
iPhones currently on the market.

Essentially, Apple is moving to a three-year upgrade cycle.
Previously, Apple came out with a new model every other year. In
the off years, it took the same basic hardware and upgraded the
components.

This year would be the third year that the iPhone would sport the
same design it introduced in 2014. And that could depress sales.

A Quartz survey suggests that only about 10% of iPhone-owning
adults are planning to buy a new iPhone this year if it isn't
redesigned.

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On an anecdotal level,
Tech Insider's Steve Kovach says he's considering skipping
this latest iPhone upgrade, even though he's been on a cycle
where he upgrades every other year.

Essentially, Apple may be turning the two-year refresh cycle into
a three-year cycle. (Earlier this year, Apple confirmed it
plans for iPhones to have a three-year lifespan for its first
owner.)

That means people would buy fewer iPhones.

Even Apple may be producing fewer iPhone 7 units this fall
because it expects softer demand, according to Deutsche Bank
researchers, although the iPhone 7 may end up selling better than
the iPhone 6S:

"However, a [year-over-year] production decline does not
necessarily imply a YoY sales decline for iPhone 7 (vs iPhone 6S)
... Apple seldom repeats a mistake, so we believe it will manage
iPhone 7 production volumes conservatively."

Of course, the upside to this is that if Apple releases a
compelling, brand-new, strong-selling iPhone in 2017, it could
find a "powder keg" of customers ready to upgrade.

Here's what Deutsche Bank analysts are expecting from the iPhone
7, based on its supply-chain checks:

A "Plus" model with a dual camera for better zoom and 3GB of
RAM

A standard model with an improved camera and optical image
stabilization

Better sound — possibly stereo sound

"Professional class water-proofing"

A home button that uses motors to simulate a click, which
would last longer than the current home button

A new color — black, or possibly dark blue, according to
rumors — so there's a version that looks different than current
iPhones

The elimination of the 3.5 mm headphone jack, as has been
discussed endlessly. Headphones will instead plug in
through Apple's Lightning charging port.

A Lightning-to-audio dongle included with the iPhone 7 — not
a pair of Lightning headphones.